莫炎熙 v. 香港房屋委員會

LDBM 256/2013

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 256 OF 2013

__________________________

__________________________

________________

J U D G M E N T

________________

1.  The applicant is an owner of a flat in Tin Chung Court which is situated in Tin Shui Wai, The New Territories (“the Estate”). The Estate is a housing estate developed by the Hong Kong Housing Authority, the respondent in these proceedings. The owners have not been incorporated so far and according to the applicant this is the reason why he has to take out these proceedings in his own name (“the Application”). The respondent had been appointed as the manager of the Estate and has continued to be so appointed at the time of trial. A Deed of Mutual Covenant (“the DMC”) was executed on 28 December 1999 between the respondent and the First Purchaser and was duly registered in the Lands Registry subsequently. It is not in dispute that the DMC is binding on all owners and the respondent who is referred to as the Authority therein.

2.  In the Application the applicant complains that the respondent has failed and refused to pay management fees of Blocks K and L (“the Subject Blocks”) prior to the issuance of their respective completion certificates on 24 November 2008 (“the Completion Certificates”).  He asks for an order that the respondent do pay its share due under the DMC and pursuant to s.34G(1) of Cap 344.  The applicant is unrepresented and has not referred me to any particular clauses in the DMC to support his case.

3.  The respondent says that its obligation to pay management fees only arose upon the issuance of Completion Certificates of the Subject Blocks and not at any earlier date.  Its case is mainly built on its interpretation of Clause 6(a) of the DMC and section 34G (1) of the Building Management Ordinance (“the BMO”).

Background

4.  There is little dispute on the facts relevant to the issues to be determined.  The respondent has built 15 blocks of residential flats in the Estate.  The Subject Blocks were found to have suffered from piling problem in around August 1999. Starting from November 1999, purchasers executed cancellation agreements to rescind their respective sale and purchase agreements concerning flats in the Subject Blocks which they had already entered into with the respondent earlier in the same year.  The respondent also arranged for foundation strengthening works (“the Works”) to be carried out at around the same time of rescission of sale and purchase agreements.  It is not disputed that generally speaking completion of the sale and purchase agreements for flats in the other 13 blocks took place by late 1999 as scheduled.  Among these 13 blocks, Blocks F, G, H and J were once suspected to have also suffered from piling problem but it turned out not to be the case.  Their respective completion certificates were issued in April 2001.  There is again no dispute that the Completion Certificates for the Subject Blocks were only issued on 24 November 2008 notwithstanding that the Works had been completed in April 2002 and June 2003.

The Respondent’s case

5.  The crux of the respondent’s case is the approach of interpreting the DMC.  Mr Mok suggests that the court should take a purposive approach than a literal approach; and when applying a purposive approach with regard to the contexts, the references to management costs and expenses in Clause 6(a) can relate only to those costs and expenses referable to the completed flats and not the building which had yet to be completed and which the respondent was still “in the course of developing”/ “constructing” within the meaning of Recital (5)(a) & (b). [Emphasis added]

6.  With this approach of interpretation it is the respondent’s case that its obligation to pay management fees would not arise until the Completion Certificates were issued. It is said that no occupation permit will be issued for buildings developed by the respondent as they are exempted from the provisions of the Building Ordinance; completion certificates would be issued instead as evidence that the building is completed.

Discussion

Interpretation of the DMC

7.  Whilst I have no disagreement with Mr Mok that “the proper starting point in statutory interpretation, as well as constitutional and contractual interpretation, is to look at the relevant words or provisions having regard to their context and purpose”, it must however be noted that the plain meaning of the text cannot be ignored.  I find the following passages of Hon Cheung CJHC in The Incorporation Owners Of One Beacon Hill v. Match Power Investment Limited CACV 226/2011 helpful:

17. In doing so, one must, however, bear in mind what is not permissible even under purposive interpretation: China Field Ltd v Appeal Tribunal (Buildings)(No 2)(2009) 12 HKCFAR 342, para 36.  Purposive interpretation means only that statutory provisions are to be interpreted to give effect to the intention of the legislature, and that intention must be ascertained by a proper application of the interpretative process.  The court is not allowed to distort or even ignore the plain meaning of the text and construe the statute in whatever manner that achieves a result which it considers desirable.”

“16.  There can be no doubt that in construing the relevant provisions in the Ordinance, the Ordinance must be considered as a whole, and one must adopt a purposive interpretation.  Town Planning Board v Society for the Protection of the Harbour Ltd (2004) 7 HKCFAR 1, paras 28 to 29; Hang Yick Properties Management Ltd v Incorporated Owners of Tuen Mun Kar Wah Building [2005] 2 HKLRD 499, para 14.

Payment Obligation under the DMC

8.  As far as the DMC is concerned the issue to be determined is whether Clause 6(a) should apply to the Subject Blocks during the time when the Completion Certificates had not been issued.

9.  Mr Mok has helpfully broken Clause 6(a) down into different parts.  I shall adopt the expressions assigned by him when Clause 6(a) is to be read and discussed.  I now set out all the 4 parts below:

The 1^st Part of Clause 6(a)

“Each of the owners shall pay a monthly sum as determined by the Manager being the due proportion of the costs charges and expenses incurred in the management of the said land and the Estate in proportion to the number of management units allocated to such part of the said land and the Estate of which he has the exclusive right to hold use occupy and enjoy.”

The 2^nd Part of Clause 6(a)

“The amount of such monthly sum shall be notified to the owner on or before possession of the flat is given. The owner shall before he is given vacant possession of his flat pay to the Manager a sum equivalent to his management contribution for the period from and exclusive of the date on which vacant possession of the flat is given to him or from and inclusive of the date following the expiration of the 14 working day period from full payment of the balance of purchase price and interest thereon (if any) whichever is the earlier to the end of the calendar month within which such date falls and an additional sum equivalent to one complete month’s management contribution as payment in advance and shall thereafter pay to the Manager his monthly contribution in advance on the first day of each calendar month.”

The 3^rd Part of Clause 6(a)

“The Authority shall pay all costs and expenses up to and inclusive of the date on which possession of the flat is given or up to the expiration of the 14 working days period from full payment of the balance of purchase price and interest thereon (if any), whichever is the earlier and thereafter the costs and expenses shall be payable by the owner.”

The 4^th Part of Clause 6(a)

“The Authority shall pay all monthly sums payable in respect of any flats go along management units are assigned to flats which shall remain in its exclusive possession or occupation and those flats bought back by the Authority under the terms covenants and conditions set out in the Schedule to the Housing Ordinance (Cap.283) and any amendments thereto.”

A plain reading of Clause 6(a)

10.  On a plain reading of Clause 6(a), I find that the 1^st and 2^nd Parts are relevant to the payment obligation of the owners whilst the 3^rdand 4^th Parts relevant to that of the respondent’s. Further “owners” is defined in Clause 9 and the respondent is referred to as “the Authority” in the DMC.

11.  In my view, the natural and proper meaning of the 3^rd and 4^th Parts is that the respondent shall be paying management fees as long as a flat remains in its exclusive possession or occupation.  Whether they were completed or otherwise was never made expressly a fact to be considered.

Context and purpose

12.  As a matter of context, Mr Mok suggested that it is important to note that the DMC envisages that there are within the Estate both residential blocks which the respondent “has developed” or “has constructed” on the one hand and those which the respondent is “in the course of developing” or “in the course of constructing” on the other under Recital (5)(a) & (b). On such basis Mr Mok argues that when Clause 6(a) is put in the context of Clause 5(a) and (b), it can relate only to completed flats; it then follows that the obligation of the respondent to pay management fees would not start until completion certificates were issued.

13.  Mr Mok further says that another context is found in Clause 6(a) itself; whilst it is clear that the provisions there relate to the payment of “management” costs and expenses, it is important to note that throughout this clause references are made to “flats”, the “vacant possession” of which was ready for delivery or has been delivered (which implicitly means completed units).

14.  When dealing with such argument, one must not forget that there had been sale and purchase agreements for “flats” in the Subject Blocks executed since early 1999 during the construction period and such agreements had to be rescinded by November 1999 upon discovery of piling problems.  In such circumstances, I do not agree that when “flats” is used in Clause 6(a), it refers to completed flats only as suggested by Mr Mok especially when it is used in the 4^th Part of Clause 6(a).

15.  I am also of the view that the expression of “vacant possession” in the 1^st Part of Clause 6(a) serves the purpose of setting out the date on which the obligation of payment is accrued on an owner who had purchased the undivided shares in the form of a flat.  This might happen, in most circumstances, when the flats are completed and ready for occupation, it does not however in my view help the respondent to say that the respondent’s obligation arose only after the flats were completed.  As mentioned, the respondent’s obligation is set out in the 3^rd and 4^th Parts of Clause 6 (a) which I shall deal with later.

16.  In support of his contention that Clause 6(a) applies to completed flats only, Mr Mok further says that under the 1^st Part of Clause 6(a), the monthly sum paid by an owner does not relate to the whole of the land and the Estate, but only to the part of the development which the owner has the exclusive right to hold, use, occupy and enjoy.  See also paragraphs 15 and 16 of the Grounds of Opposition.  [Emphasis added]

17.  I am of the view that as could be seen from the text of the 1^st Part of Clause 6(a) (see paragraph 9 above), the “costs charge and expenses” are those “incurred in the management of the said land and the Estate” as expressly stipulated in the 1^st Part of Clause 6(a) and not those “only relate to the part of the Estate which an owner has the exclusive right to hold use occupy and enjoy” as suggested by Mr Mok.  [Emphasis added]

18.  “The said land” and “the Estate” have been used in Recitals 4(a) and 5(a) in the DMC:

Recital 4(a)

Immediately prior to the assignment to the First Purchaser hereinafter mentioned the Authority was the sole registered owner of and beneficially entitled to the said The Remaining Portion of TIN SHUI WAI TOWN LOT No.18 (hereinafter called “the said land”).

Recital 5(a)

The Authority has developed or is in the course of developing the said land in accordance with the said lease and has constructed or is in the course of constructing thereon 15 residential blocks of flats with other facilities (which said buildings and other facilities are hereinafter collectively referred to as “the Estate”).

19.  The natural and proper meaning of the 1^st Part of Clause 6(a) cannot come to a meaning as suggested by Mr Mok when read together with Recitals 4(a) and 5(a). I am of the view that the phrase “such part of the said land and the Estate of which an owner has the exclusive right to hold use occupy and enjoy” was to stipulate a mechanism for working out the contribution to be made by an owner which “shall be in proportion to the number of management units allocated to such part of the said land and the Estate of which the owner has exclusive right”.  It should not be understood to say an owner is liable to pay those “costs charge and expenses incurred in relation to the part which he has exclusive right” as suggested by Mr Mok.

20.  Moreover, I am of the view that the proportion of contribution is not determined at the discretion of the respondent as the Manager as suggested by Mr Mok, but it has always been governed by the First Schedule of the DMC.  The Manager’s power or duty in this regard is to work out the contribution to the monthly sum by the owner of each flat in strict compliance with the proportion stipulated therein in the form of number of management units.

21.  As I have just mentioned it is also Mr Mok’s argument that on the true construction of  the 1^st Part of Clause 6(a), such “costs charge and expenses” only relate to the part of the Estate which an owner has the exclusive right to hold use occupy and enjoy (see paragraph 22 of the Grounds of Objection), along this line, he further submits that since the respondent during the time prior to the issuance of the Completion Certificates did not and was not able to enjoy the Subject Blocks, it would be grossly unfair to interpret Clause 6(a) in such a way that the respondent should be taking sole responsibility to bear the costs charge and expenses relating to them.  Relying on the same contention Mr Mok further argues that at the time of the Works, it was the contractor who had possession and occupation of the Subject Blocks.  As a result, it is said that, the respondent was not liable to pay such “cost charge and expenses” during the time of the Works but only became so liable when the Completion Certificates were issued, i.e. on 24 November 2008.  

22.  First, I would like to point out that the phrase “the exclusive right to hold use occupy and enjoy” appears in the 1^st Part of Clause 6(a) when the obligation of an owner is set out.  When the respondent’s obligation is defined in the 4^th Part of Clause 6 (a), the phrase used is “flats which shall remain in its exclusive possession or occupation…”

23.  Further I am of the view that as the developer of the Estate, the respondent must be the one who had “the exclusive right to hold use occupy and enjoy” even prior to the issuance of the Completion Certificates but until the respective part of the said land was assigned to a purchaser.  My such view is confirmed by Clause 1(a) of the DMC which expressly stipulated that the respondent shall have the sole and exclusive right to hold use occupy and enjoy All that the said land and the Estate to the exclusion of the First Purchaser (applies to all other owners) save and except the common parts and the First Purchaser’s Flat:

Clause 1 (a)

“The Authority shall during the residue of the said term of years[1] have the sole and exclusive right and privilege to hold use occupy and enjoy to the exclusion of the First Purchaser All that the said land and the Estate including all those flats the kindergarten, day nursery, empty bays and car park spaces under in and of the buildings within the Estate save and except the common parts and the First Purchaser’s Flat.”

24.  The contention that the contractor was the one who had possession of the Subject Blocks during the time of the Works and should therefore be liable pay the management fees could not in my view assist the respondent either.  Under the DMC, only an owner or the respondent shall be liable to pay management fees but not just anyone who is in possession.  The contractor is not an owner nor was it a party to the DMC.  The contractor might have, for the purpose of carrying out the Works, been granted a license to enter into the Subject Blocks whilst the respondent was the sole registered owner of the said land under Recital 4(a) who had the exclusive right to hold use occupy and enjoy at all times under Clause 1(a) before assignment of a particular part of the said land.

25.  Another problem with Mr Mok’s argument is that it fails to account for the payment obligation for the period since completion of the Works in 2002 to the time the Completion Certificates were issued in 2008.  The respondent did not say who was in exclusive possession during that time other than itself.

26.  The problem can only be resolved when the said land and the Estate is taken as an entity as far as management expenses are concerned where the owners would have to share such expenses in proportion to the respective part owned by them in terms of management units.  For those flats which remain in the exclusive possession of the respondent or sold back to the respondent, it is the obligation of the respondent to pay under the 3^rd and 4^th Parts of Clause 6(a).

27.  Further it could be seen from the minutes of the owners’ meeting dated 20 January 2005 and I accept that that the sale of the Subject Blocks was put on hold pursuant to administration policy that there should be less home ownership scheme units to be put to the market for reasons not relevant to these proceedings and it was the decision of the respondent that the flats of the Subject Blocks should not be furnished until a time closer to their being sold.  This explained why the Completion Certificates were only issued in 2008 while the Works finished in 2002 and 2003. The relevant paragraph of the minutes of the said meeting is as follows:

“3.2  胡朝暉經理解釋，K、L兩座的建築工程基本上已完成，為配合政府相關政策，此兩座樓內的餘下設施裝置工程會暫時停止直至政府恢復發售居屋等措施最後落實。以免安裝後因長時間的空置而引致損耗。”

28.  In any event, as I have mentioned earlier, the respondent’s obligations are set out in the 3^rd and 4^th Parts of Clause 6(a).  By operation of Recital 4(a) and Clause 1(a) set out in paragraphs 23-24 above, I am of the view that as the developer, the respondent does not have to wait for the issuance of the Completion Certificates to acquire its exclusive possession and the ensuing rights.  Further, the Completion Certificates served, in my view, mainly as a notice to denote the completion of the building for the purpose of operation of clauses 4 and 5 of the sale and purchase agreement in which the obligation of the parties to complete or otherwise default the same is set out.  The following clauses are relevant:

“1. (1)(d) the certificate to be issued by the Chief Architect [of the Housing Department] to the effect that the Building has been completed and made fit for occupation in accordance with this Agreement, which certificate, when issued, shall be conclusive evidence of the facts stated therein.
4(2)(a) Subject to Clause 4(2)(b), if the Vendor fails to complete the Building by the Completion Date or………
4(2)(b) If the Purchaser does not rescind this Agreement under Clause 4(2)(a) within 28 days from the Completion Date or any extended date, he shall be deemed to have elected to ………
4. (5) For the purpose of this clause the Building shall be completed when a Completion Certificate is issued.
5.(1) The Vendor ….. shall notify the Purchaser in writing of the issue of the Completion Certificate as soon as it is issued. The sale and purchase shall be completed ….. within 14 days from the date of the said notification whereupon the Purchaser shall pay the balance of the purchase price in accordance with Clause 3(2).
5.(2) On completion of the sale and purchase the Vendor shall execute a proper assurance of the Property to the Purchaser only free from encumbrances but subject to the Government Grant. The Vendor shall within 14 working days after full payment of the balance of purchase price and interest thereon (if any) deliver to the Purchaser vacant possession of the Property…..”

29.  A copy of the completion certificate as shown below is exhibited at page 175 of the trial bundle:

“Our Ref.: HD(AR)14/625/R1 Date : 24 Nov 2008   HOME OWNERSHIP SCHEME Completion Certificate for Blocks K & L Tin Chung Court I hereby certify completion of Blocks K & L of Tin Chung Court which is designed for domestic use.
	Yours faithfully,     (Y.C. LEUNG) Chief Architect/1 for Director of Housing”

30.  From the above, it is clear that the Completion Certificate does not confer exclusive possession or occupation on the respondent while Recital 4(a) and Clause 1(a) did so.

31.  To conclude, I do not agree that Clause 6(a) could be interpreted in a way that it applies to completed flats only.  When reading the DMC as a whole, especially together with Recital 4(a) and Clause 1(a), I am not persuaded that the word “flat” used in Clause 6(a) should be modified to mean “completed flat”.  I think I have already dealt with the bone of the respondent’s contention.  I do not think I have to embark on analysing the evidence as to whether the respondent had been using the part of land in relation to the Subject Blocks.  For the above reasons, I find such argument irrelevant.

32.  Mr Mok has also suggested that the costs and expenses for management and the Works for the Subject Blocks which was in the course of developing/constructing should not fall within Clause 6(a) and it would be unfair if owners of flats in other blocks be requested to share.  I do not agree that those other owners in the Estate should be bearing costs for remedying the piling problem but even Mr Mok’s approach is correct, this does not necessarily mean that the respondent could be exonerated from the obligation to share the management costs of other blocks pursuant to the First Schedule under the 3^rdand 4^th Parts of Clause 6(a).

33.  The construction I favour is supported by authorities.  In陳智貞 and another v. MTR Corporation Limited, LDBM 215/2009, a case in which Judge M. Wong decided that although the block in question was handed over to the respondent one year after the Occupation Permit was issued, and the respondent had no use of the same, the respondent was liable to pay management fees according to the DMC since issuance of Occupation Permit at which time it had become an owner as stipulated in the DMC and not from a date it took possession of the building.

34.  As I found that the respondent was in exclusive possession of the Subject Blocks at the time when management fees were first incurred in December 1999, it had to bear the share of contribution assigned under the First Schedule pursuant to Clause 6(a).

35.  Last but not the least, it is not disputed that the piling problem was known to the respondent prior to the date of the DMC.  One could however still see that the Subject Blocks were included in the First Schedule of the DMC for assignment of the number of undivided shares and Management Units.  The respondent did not resort to write another DMC for the Subject Blocks nor did they choose to have the “purpose” written out in Clause 6(a) to expressly reflect that obligation of the respondent is confined to completed flats only. It is trite that in law, “every man’s grant shall be taken by construction of law most forcibly against himself”[2].  So if there is doubt or ambiguity created by the present wordings, such ambiguity or doubt should be taken strongly against the grantor.  In the case of Clause 6(a), if there is any ambiguity, which I do not accept, it should be construed more strongly against the respondent.

Section 34G(1) of BMO

36.  This sub-section provides:

“If, at the time a deed of mutual covenant was or is made in respect of a building, any share in the building had not or has not been sold, the owner for the time being of the share shall, for so long as it remains unsold, be liable to pay the management expenses relating to the share as if he had purchased that share subject to the deed of mutual covenant.”

37.  It is submitted for and on behalf of the respondent that the key to this sub-section lies in the words: “as if he had purchased that share subject to the deed of mutual covenant”.  These words show that s.34G(1) is intended to target the case where, under the deed of mutual covenant in question, the developer is not required to pay the management fees referable to unsold flats, i.e. the flats which the developer is in a position to deliver but had not done so.  This provision has the effect of deeming such unsold flats as sold flats (“as if he had purchased” the undivided shares referable to such flats) and fixes the liability for paying management fees equally between both types of flat.  

38.  It is therefore submitted that the respondent has not acted contrary to this sub-section during all the material times before the foundation and reinstatement works for the relevant residential blocks had been completed.

39.  I agree that Part VIA of the BMO was intended to deal with unfair terms in DMCs[3] and the practical effect is that it limits the developer’s power to insert unfair terms in the DMC after it comes into effect[4].  This however does not help the respondent.  Mr Mok further submits that section 34G(1) does not prohibit the allocation of management costs and expenses between completed and uncompleted flats on a basis which is fair as between the owners of both types of flats.  Since I have made a finding on the construction of Clause 6(a), this submission is not relevant.  

40.  In the circumstances of the present proceedings, at the time of the DMC, the respondent as the developer and owner of the Subject Blocks who was in exclusive possession of the same shall be liable to pay the management expenses in relation to the share as if it had purchased that share subject to Clause 6(a) of the DMC.  The respondent should therefore be liable to pay the management expenses relating to those shares pursuant to the First Schedule starting from December 1999.  Having failed to do so, the respondent has acted contrary to this sub-section.

Conclusion

41.  For reasons set out in the above, judgment is entered for the applicant.  I also order that directions hearing be fixed on 28 August 2014 (Thursday), 10 am at Court No. 4 for assessment of quantum, with 1 hour reserved.

Costs

42.  I see no reason why costs should not follow the event.  I order that the respondent do pay the applicant costs of the Application, to be taxed at District Court scaleif not agreed.  This is an order nisi to become absolute within 14 days if no application is taken out to vary the same.

43.  The applicant do lodge and serve its Statement of Costs within 21 days from today, and the respondent do lodge and serve its List of Objections within 14 days upon receipt of the Statement of costs from the applicant.

[1] Paragraph (2) of the Recital: the term of fifty years commencing on the 8^th day of January 1999

[2] Chitty on Contracts Vol 1, (31 ed) para12-83

[3] Malcolm Merry & Paul Kent, Building Management in Hong Kong (2^nd ed) 67

[4] Ditto